Commodity prices hit amid growing risk aversion

Commodity prices tumbled across the board Tuesday amid a flood of bearish economic data, including an unexpected drop in consumer confidence.

Prices for gold, copper and oil were all lower after a private research group said consumer confidence fell in June. The decline contrasted sharply with the big jumps in the Conference Board’s measure of consumer sentiment in April and May.

Consumer sentiment is a closely watched monitor since consumer spending comprises more than two-thirds of economic activity. If consumers are worried about the economy, they will keep their wallets tight, which hurts demand for basic materials.

Grain prices, meanwhile, were hit hard by a government report showing a big increase in expected production.

A stronger dollar did little to stoke commodities buying. The dollar moved higher against the euro and the British pound Tuesday after the British government said the U.K. economy shrank in the first quarter by more than originally reported — the worst drop in half a century.

The dollar also benefited from a flight to safety Tuesday as investors moved out of stocks, commodities and other risky assets following the disappointing consumer confidence data. The Dow Jones industrials were down more than 100 points in afternoon trading.

Commodities tend to benefit when the dollar is weak, as it makes them cheaper for foreign investors.

Gold for August delivery fell $13.30, or 1.4 percent, to $927.40 an ounce on the New York Mercantile Exchange.

September silver dove 37.5 cents to $13.60 an ounce, while July platinum fell $7.50 to $1,176.70 an ounce.

Among base metals, September copper futures lost 5.4 cents to $2.2720 a pound. Aluminum prices also declined.

Like stocks, commodities staged an impressive rally since early March, due in part to weakness in the dollar, which fell as the economic outlook improved and investors’ appetite for risk grew. But that rally has been on hold in recent weeks amid increasing doubts about the economy’s prospects for a quick and robust recovery.

On the Chicago Board of Trade, corn prices took a beating after the U.S. Department of Agriculture said farmers planted 87 million acres of corn — more than analysts expected and the second-largest corn acreage in more than 60 years.

Corn for September delivery dropped 30 cents — the maximum amount prices are able to fall in a single session — to finish at $3.5450 a bushel.

The USDA also reported a bigger supply of corn reserves on hand than many analysts forecast. The robust figures were surprising considering the rainy weather this season in the eastern Corn Belt.

Darrell Jobman, senior analyst at TraderPlanet.com, called the figures “shocking.”

“If you’re a corn bull, today was not a particularly great day,” he said.

September wheat futures fell 17 cents to $5.4075 a bushel, while August soybeans shed 2.75 cents to $11.1925 a bushel. Wheat acreage numbers also came in higher than expected, while the increase in the amount of soybeans planted wasn’t as large as anticipated, Jobman said.

Oil prices fell Tuesday after earlier hitting an eight-month high. Prices have been extremely volatile as traders weigh the prospects for inflation against potential future demand.

Light, sweet crude dropped $1.60 to settle at $69.89 a barrel on the New York Mercantile Exchange.

In other Nymex trading, gasoline for July delivery fell 3.86 cents to $1.8972 a gallon and heating oil fell 6.55 cents to $1.718 a gallon.Copyright 2009 The Associated Press.